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Cost Audit

In: Business and Management

Submitted By mayurip
Words 709
Pages 3
Cost Audit

Cost Audit in EDP environment

When planning the cost audit, the cost auditor should consider an appropriate combination of manual and computer-assisted audit techniques (CAATs). In determining whether to use CAATs, he should take into account: i) His computer knowledge, expertise and experience. ii) Availability of CAATs and suitable computer facilities. iii) Impracticability iv) Effectiveness and efficiency. v) Timing.

In an EDP environment, the control procedures take basically two stages:
1. Manual Procedure – i.e. the clerical work done up to the translation of data into machine-sensible form. This stage, being manual, is subjected to usual internal control conditions and the Cost Auditor will have little difficulty in appraising them by means of ‘compliance test’ and ‘substantive’ test’.

2. Computer Procedures – i.e. the computer processing work. Auditing in this area is actually a complex activity, for which the Cost Auditor as a prudent person should develop himself for adequate EDP knowledge. Before the actually starts to conduct his audit in EDP environment he should envisage to maintain an ‘Audit Control File’, as his valuable kit. The Computer Audit control File may be built up containing full details of the system including:

i) Copies of all source documents and the details of the checks that have been done to ensure their accuracy. ii) Details of physical control over source documents and any control tools on numbers, quantities, values including the names of the personnel keeping these controls. iii) Full description of how the source documents are to be converted into input media, and the check-cum-control device. iv) A detailed account of the manual internal controls contained in the system, e.g. separation of programmers from operators, control of assets from record keeping, etc. v)...

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